The U.S. dollar rose to a recent 14 month high on Wednesday as minutes of the latest Federal Reserve policy meeting fuelled expectations of a U.S. rate increase as early as March.
The Fed's December meeting minutes showed that officials discussed shrinking the U.S. central bank's asset holdings and raising interest rates sooner than expected to fight inflation.
Money markets are now pricing an 80% chance of a U.S. interest rate rise by March and more than 80 basis points of cumulative rate increases in 2022, a move that was not anticipated by investors three months ago.
The dollar index was only slightly higher than Wednesday's levels, but the greenback took big strides against some of its rivals, such as the Australian and Canadian dollars.
The dollar index was 0.2% higher at 96.393, within a striking distance of a November high of 96.938, which was the highest level since July 2020.
The hawkish tone of the minutes support our outlook for further US dollar strength at the beginning of this year, MUFG strategists said.
The Aussie fell by more than 1% to $0.7146, from as high as $0.7273 on Wednesday.
The pound was down 0.3% at $1.3507, after the Fed minutes retreated overnight from the $1.3599 level, its highest in nearly two months.
The euro was broadly unchanged at $1.13 as it continued to consolidate in the middle of the trading range it has been in since mid-November.
After falling more than 5% overnight, the overnight market selloff hit the hardest, with Bitcoins nursing losses below $43,000 levels.